There’s a risk that tough trade talk between the U.S. and China will return with gusto in 2018 and investors may not be prepared.

Trade disagreements between the two nations were something of an afterthought in 2017 as concern about North Korea’s nuclear weapons program dominated the political relationship between the two nations. That could soon change, according to Exante Data LLC Chief Executive Officer Jens Nordvig.

(Dollar Photo Club)

“One of the big wild cards for next year is there’s going to be a real escalation in terms of U.S.-China trade tensions, and I don’t think the market’s pricing that at the moment,” Nordvig said in a recent Bloomberg Television interview.

“The North Korea issue has delayed the U.S.-China issue really coming to the fore.”

However, after accusing the Chinese of secretly allowing North Korea to receive oil shipments, the president’s patience may be wearing thin. And with the market seemingly nonchalant about the U.S. administration’s trade rhetoric, action on China may surprise investors in 2018.

In a sign of the market’s tranquility, the one-year implied volatility on the dollar-yuan exchange rate is close to half the peak it reached in the wake of Donald Trump’s election last year. Reduced levels of implied volatility show that the market isn’t adequately priced for an escalation in U.S.-China friction, according to Nordvig.

“If you think about all the official statements the administration has on trade policy, China is the biggest offender,” Nordvig said. “So it’s highly likely it’s going to be attacked — the only question is how aggressively.”